Damaschke, Charlotte v Official Trustee in Bankruptcy & Ors [1998] FCA 690

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 7440 of 1998

BETWEEN: CHARLOTTE DAMASCHKE

Applicant

AND: OFFICIAL TRUSTEE IN BANKRUPTCY

AND: FIRST Respondent

ROBERT JOHN CRUICKSHANKS and SUE MAY FLORENCE CHOO

SECOND RESPONDENTS

JUDGE: LINDGREN J

DATE OF ORDER: 11 JUNE 1998

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. The application be dismissed. 2. The applicant pay the respondents' costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 7440 of 1998

BETWEEN: CHARLOTTE DAMASCHKE

Applicant

AND: OFFICIAL TRUSTEE IN BANKRUPTCY

AND: RESPONDENT

ROBERT JOHN CRUICKSHANKS and SUE MAY FLORENCE CHOO

SECOND RESPONDENTS

JUDGE: LINDGREN J

DATE: 11 JUNE 1998

PLACE: SYDNEY

REASONS FOR JUDGMENT (ex tempore) INTRODUCTION There is before the Court an amended application by Charlotte Damaschke ("Mrs Damaschke"). Mrs Damaschke appears in person aided by her husband, Erhard Damaschke. Both have addressed me. The first respondent is the Official Trustee in Bankruptcy as trustee of Mr Damaschke's bankrupt estate ("the Official Trustee"). The amended application seeks a review of the Official Trustee's administration of the estate of Mr Damaschke. Section 178 of the Bankruptcy Act 1966 (CTH) provides that if a person is affected by any act, omission or decision of a trustee in bankruptcy, the person may apply to the Court and the Court may make such order in the matter as it thinks just and equitable. Mrs Damaschke claims to be affected by a decision of the Official Trustee in relation to the estate of her husband. The disputation which forms the background to the proceeding has a long history and concerns a rural property a few kilometres north east of Mudgee, namely Lot 4, Mount Pleasant Lane, Mudgee, being the land the subject of Folio Identifier 4/575974 ("the Property"). The second respondents ("the Trustees") have been appointed by this Court as trustees for sale of the Property pursuant to s 66G of the Conveyancing Act 1919 (NSW) on the application of the Official Trustee. Until the events described below, the Property was registered in the names of Mr and Mrs Damaschke as joint tenants and they both lived in a house forming part of it. It is now registered in the names of the Trustees. Recently Mr and Mrs Damaschke have been evicted. Mrs Damaschke seeks an injunction to prevent the Trustees from selling the Property. They are proposing to put the Property up for auction on 27 June 1998. On 5 June 1998, the respondents filed a notice of motion seeking an order that the amended application be "struck out". This was inappropriate: in substance what was sought was summary dismissal. The solicitor for the respondents suggested that instead of a hearing of the respondents' motion, Mrs Damaschke's application for final relief be heard. Mrs Damaschke agreed to this course. Accordingly, these reasons relate to the final hearing of the proceeding. CHRONOLOGICAL ACCOUNT OF BACKGROUND FACTS The relevant events go back at least to 1993. The Commonwealth Bank of Australia apparently obtained a judgment against Mr Damaschke and procured the issue of a bankruptcy notice NN 1736 of 1993, which it wished to serve on Mr Damaschke. There has been a long course of affidavit evidence in relation to difficulties said to have been experienced in serving documents on Mr Damaschke and later on Mrs Damaschke. The Property is, as I said, a rural property some few kilometres north east of Mudgee. Apparently the house is some two to two and a half kilometres from the gate (see later). The gate is barred by an iron chain. Glenn James Miller, a licensed commercial agent of Orange, made an affidavit to the effect that on 9 June 1993, he attended at the Mudgee Police Station to make inquiries as to the whereabouts of the Property in order to serve the bankruptcy notice and spoke with a male constable who said: "You're game going there, he's a maniac, be careful" and apparently added: "We've been out there a couple of times and had to confiscate a number of guns he had as neighbours complained about shots they'd heard. He gets a little upset when people trespass on his property." I should add that Mr Damaschke has informed me from the Bar table that there is no substance in the allegations so made or in others to which I will shortly refer. Apparently the bankruptcy notice was served either personally or by substituted service and the next step was the issue of a creditor's petition NP 1569 of 1994 by the Bank against Mr Damaschke. On 25 August 1994, Registrar Tesoriero made an order for substituted service of the petition. On 15 November 1994, a sequestration order was made against the estate of Mr Damaschke based on his non-compliance on 23 March 1994 with the bankruptcy notice. On 21 July 1995, the Insolvency and Trustee Service Australia ("ITSA") wrote to Mrs Damaschke at Lot 4 Mount Pleasant Lane, Mudgee NSW 2850, referring to the bankruptcy of Mr Damaschke and to their joint ownership of the Property. The letter advised that Mrs Damaschke had three options: 1. to purchase the Official Trustee's right, title and interest in the Property; or 2. to join with the Official Trustee in a sale of the Property; or 3. to be the respondent in a proceeding by the Official Trustee "to have a receiver appointed to sell the property". On 24 November 1995, ITSA wrote to Mrs Damaschke referring to its letter of 21 July, noting that no reply had been received, and enclosing a further copy. On 7 February 1996, ITSA again wrote to Mrs Damaschke pointing out that her husband's interest in the Property had vested in the Official Trustee under ss 58 and 116 of the Bankruptcy Act 1996 (CTH) and that the Official Trustee, as trustee in bankruptcy, had a duty to realise the asset for the benefit of creditors. Again, the options available to Mrs Damaschke were pointed out. The letter concluded by advising that if an offer was not forthcoming from Mrs Damaschke, an application would be made under s 66G of the Conveyancing Act 1919 (NSW) in this Court "to have a receiver appointed to sell the property". On 13 August 1996, Abbott Tout, the solicitors for the Official Trustee, wrote two letters, one to Mrs Damaschke and one to Mr Damaschke, addressed to them at Lot 4 Mount Pleasant Lane, Mudgee NSW 2850. The letters advised that Abbott Tout acted for the Official Trustee and requested production of the certificate of title for the Property. On 30 August 1996, the Official Trustee filed an application for appointment for trustees for sale in proceeding NB 2649 of 1994, that is, the bankruptcy proceeding. It named Mrs Damaschke as respondent. Again, according to the evidence, there was difficulty in effecting service. Peter Chilcott of Orange, a licensed commercial agent, made an affidavit on 23 September 1996 to the effect that he had, on 18 September 1996 attended at the Property at 9.45 am and that he had seen the entry by way of the gate barred by way of a large steel chain of approximately 50 millimetre links which was secured by a large padlock. His affidavit was to the effect that he made extensive inquiries in the neighbourhood and eventually located a male person who lived at the adjoining property and had a conversation with that person. The person to whom he spoke said that the house was 2 to 2˝ kilometres from the road and that there were two large, vicious dogs and that he, the informant, would not go up there. He also referred to guns. The informant said that gate was the only access to the house. According to his affidavit, Mr Chilcott was of the opinion that further attempts to effect personal service upon Mrs Damaschke would entail undue delay and cost. In the event, on 9 October 1996, an order for substituted service of the application was made by Registrar Mathieson. According to a letter dated 7 January 1998 from Abbott Tout to a Mrs Alexis Damaschke of PO Box 246 Mudgee (I refer to her below), on 29 October 1996, Mr Damaschke contacted Abbott Tout asking that the application under s 66G be adjourned so that he could attend and on 31 October 1996, he again contacted Abbott Tout when he was told that the Official Trustee would not agree to an adjournment. On 4 November 1996, the hearing of the Official Trustee's application under s 66G was in fact adjourned to 19 November 1996. On that date the application was heard and Einfeld J made an order appointing the Trustees as trustees of the Property upon the statutory trust for sale pursuant to Part IV Division 6 of the Conveyancing Act 1919 (NSW). It is noteworthy that paragraph (7) of his Honour's order was that the Trustees have vacant possession of the Property prior to the date of the sale of the Property and that paragraph (10) provided: "That a signed and sealed copy of this order be served upon [Mrs Damaschke] in the same manner as ordered by Registrar Mathieson on 9 October 1996 namely: (a) that a signed and sealed copy of this order be securely affixed in a waterproof envelope to the gate of the property referred to in folio identifier 4/575974 and known as Lot 4 Mount Pleasant Lane, Mudgee in the State of New South Wales; (b) that a signed and sealed copy of this order be sent by ordinary prepaid post together with a letter addressed to the respondent at PO Box 566, Mudgee NSW 2580; (c) that the order shall be deemed to have been served on the respondent seven (7) days after service in accordance with (a) and (b) above whichever is the latter." On 29 November 1996, Abbott Tout wrote to Mrs Damaschke enclosing a sealed copy of the orders and requesting the certificate of title within seven days of the date of the letter. Apparently, although there is not clear evidence of this, on 5 December 1996, a sealed copy of the orders was served by affixation to the front gate of the Property. On 7 May 1997, the Trustees wrote to Mrs Damaschke requesting production of the certificate of title. On 1 July 1997, they wrote to Mr and Mrs Damaschke allowing a final opportunity for payment to be made in order to prevent sale. The letter referred to the amount to be paid as being $90,702.97. This amount included the judgment debt, interest and costs and an amount owing to the Australian Taxation Office. The letter advised that the Trustees had become registered on the title to the Property as proprietors. On 22 July 1997, Mr Damaschke telephoned Mr Cruickshanks in response to the Trustees' letter of 1 July. There is in evidence a diary note of the telephone call from Mr Damaschke. The note begins with an error, in that it refers to receipt of a letter dated 1 August 1997. Clearly the reference should be 1 July 1997. The diary note went on to record that Mr Damaschke was telephoning from the Mudgee Post Office as he was having problems with his home phone; that he had found some gemstones on the Property which the local jeweller was unable to identify but said were extremely valuable; and that he was bringing the gemstones to Sydney to be identified, valued and sold in order to raise the necessary funds to obtain a discharge from his bankruptcy. According to the diary note, Mr Damaschke requested particulars of the payout figure and also a further two weeks in which to obtain the necessary funds; Mr Cruickshanks extended the period for payment to close of business on Thursday, 7 August 1997 and gave Mr Damaschke details of the payout figure; and Mr Damaschke thanked Mr Cruickshanks for the extension of time and said that he would attend at the Official Trustee's office when he came to Sydney within the next week. On 23 July 1997, the Trustees wrote to Mr Damaschke extending the time for the giving up of vacant possession to 7 August. The letter also gave particulars of the "payout" figure of $90,702.97. Apparently, the Trustees caused a writ of possession to be issued on 26 November 1997. On 16 December 1997, Mr Damaschke again telephoned Mr Cruickshanks. There is in evidence a lengthy diary note of Mr Cruickshanks of the conversation which is said to have taken place. Perhaps it suffices to say that some of the things which Mr Damaschke is recorded as having said are quite unusual. However, I will not dwell on them. There was a reference to gold and diamonds on the Property and Mr Damaschke said that he needed more time to find the gold and diamonds in order to prevent a sale. (These are not the unusual matters to which I referred.) Mr Cruickshanks agreed to grant an extension of time to 16 January 1998. On 23 December 1997, a woman telephoned Abbott Tout purporting to be Alexis Damaschke, the daughter-in-law of Mr Damaschke. Mr and Mrs Damaschke have informed me from the Bar table that the woman must have been an impersonator. On 7 January 1998, Abbott Tout wrote a lengthy letter to Mrs Alexis Damaschke, PO Box 246 Mudgee, which purported to outline the history of the matter and concluded by stating that Abbott Tout were instructed to obtain a new eviction date towards the end of January unless the outstanding debt was paid. On 16 January 1998, Mr Damaschke attended upon Mr Cruickshanks at the Parramatta office of ITSA at about 1.30 pm. Again, according to Mr Cruickshanks' diary note, the conversation was somewhat unusual. Again, I do not think it necessary to refer to the many matters which, according to the diary note, Mr Damaschke said. There was a repetition of an allegation, previously made by Mr Damaschke, of conspiracy by various persons to have Mr Damaschke evicted so that the persons in question could mine the Property for gold and gemstones. Mr Damaschke also referred to a poisoning of the Property's water supply and other matters. Mr Cruickshanks told Mr Damaschke that he had heard the allegation of conspiracy made previously but had not found any tangible evidence to support it. According to the note, he told Mr Damaschke that he had had ample time in which to obtain financial assistance to prevent a sale of the Property. However, Mr Cruickshanks agreed to "one final extension of time" to 31 January 1998. On 22 January 1998, Mr Cruickshanks wrote to Mr Damaschke referring to their meeting on 16 January and confirming that one further extension of time was granted to 31 January. The letter advised that if funds were not received by then, action would be taken to have Mr and Mrs Damaschke evicted. Payment was not made. The eviction took place on 19 February 1998. On 27 February 1998, Mr Damaschke filed application NG 7224 of 1998 in this Court naming the Official Trustee as the only respondent. On 21 April 1998, O'Connor J dismissed the application on the ground that it was between "the wrong parties". On 23 April 1998, Mrs Damaschke filed the application by which the present proceeding was commenced and an accompanying affidavit by her of the same date. Again, only the Official Trustee was named as respondent. On 28 April 1998, Abbott Tout wrote to Mrs Damaschke at PO Box 566, Mudgee. The letter complained that the application had been filed only against the Official Trustee, yet sought to prevent a sale of the Property by the Trustees. On 30 April 1998, Mr Damaschke attended at the office of ITSA and he was handed a copy of Abbott Tout's letter to his wife dated 28 April. ITSA also wrote to him on 30 April referring to his attendance at its office that day and estimating the amount required "to pay out the bankruptcy" as $105,000. It gave particulars of amounts totalling $104,184.81 and referred to some further charges which would, apparently, have increased this amount a little. Mrs Damaschke's proceeding was before me for the first time on 5 May 1998. Mr Bartrop, solicitor for the Official Trustee, raised the same issue: failure to join the Trustees as respondents. On 5 June 1998 I gave Mrs Damaschke leave to file in Court an amended application joining the Trustees as second respondents (for whom Mr Bartrop was also to appear) and I gave the respondents leave to file a notice of motion returnable on 9 June 1998 seeking summary dismissal. As I mentioned earlier, a notice of motion seeking an order that the amended application be "struck out" was filed on 5 June 1998. REASONING Mrs Damaschke relies on her original affidavit sworn on 23 April 1998 and on an affidavit by Mr Damaschke sworn on 30 April 1998. Mrs Damaschke's affidavit states: "1. THE ACTIONS OF THE TRUSTEES HAS CAUSED ME EXTREME DISCOMFORT AND PAIN DUE TO MY PHYSICAL CONDITION. MY HEALTH AND WELLBEENG [sic] HAS GREATLY SUFFERED THROUGH ALL THIS AND HAS WORSEN [sic] MY CONDITION. I CHARLOTTE DAMASCHKE NOT A BANKRUPT. THE COURT ORDER ON THE 25 OF AUGUST 1994 OBTAINED BY THE TRUSTEES AND SOLICITOR BY FRAUD THE ACTION OF THE TRUSTEES COULD ONLY BE ACHIEVED WITH CORRUPT POLICE. I HOPE THAT YOUR HONOUR WILL PERMIT US TO RETURN TO OUR HOME TO LIVE THERE. I ASK THE COURT TO INVESTIGATE THE CORRUPT ACTIONS OF THE MUDGEE POLICE AGAINST US." Mr Damaschke's affidavit is in substance identical to his wife's, with necessary adjustments, such as substitution of "my wife" for "me". Mrs Damaschke first points out that she has not been a bankrupt and she does not see why she should have been evicted or why her interest in the Property should be sold. The answer is found in the operation of s 66G of the Conveyancing Act 1919 (NSW). It is clear that the Trustees are authorised to sell the entire interest of Mr and Mrs Damaschke in the Property. Mrs Damaschke's right to reside in the Property was a right arising from her co-ownership. She is no longer a co-owner of the Property. The owners now are the Trustees. Mr and Mrs Damaschke will have interests in the proceeds of sale in place of their interests in the Property. However, neither Mrs nor Mr Damaschke now has an interest in the Property which carries with it a right of possession. A second matter raised by Mr and Mrs Damaschke is the alleged non-receipt of many of the communications. They, and in particular Mrs Damaschke, have denied receiving correspondence. For her part, Mrs Damaschke said that she received no document relating to the appointment of the Trustees. The various orders that have been made stand until they are set aside. They included Registrar Mathieson's order on 9 October 1996 for substituted service of the Official Receiver's application for the appointment of trustees for sale. In any event, it is clear that Mr Damaschke, at least, was aware of that application: he contacted Abbott Tout on 29 and 31 October 1996 in relation to an adjournment of the hearing of the application which was then expected to take place on 4 November 1996. Even if the documents were in Mr Damaschke's possession rather than that of Mrs Damaschke, I do not accept that Mrs Damaschke was unaware that the application was pending and that her husband was, on her behalf, seeking the Official Trustee's agreement to an adjournment. The position of Mr and Mrs Damaschke is that documents were able to be served on them without difficulty. Mrs Damaschke, through Mr Damaschke, tendered a photograph of the chained entrance to the property and made the point that although the chain prevented vehicular access, it did not prevent a person from climbing over the chain. The submission did not address the distance, as noted earlier some two to two and a half kilometres, that the person would have to walk in order to reach the house. A third matter raised by Mrs Damaschke is the state of her health. This does not provide a legal basis for the granting of relief. A fourth matter is the assertion of police conspiracy. I do not understand how it is said that the procedures followed by the Official Trustee and the Trustees resulted from a conspiracy by the police. In any event, there is no evidence before me of any conspiracy. On the hearing, I raised with Mr and Mrs Damaschke the question of what purpose would be served if, in effect, the proceeding were to start afresh. The point which I raised with them is simply this: an amount of the order of $105,000 must be paid, and, so far as the evidence reveals, in one way or another, the Property will have to be sold to enable payment to be made. They offered no satisfactory answer. Of course if required procedures had not been followed, the irregularity would remain a ground on which Mrs Damaschke could rely. The present point is simply that Mrs Damaschke has not been able to suggest any basis on which the Property would not have to be sold if events had taken a different course. While I understand the difficulty in which Mr and Mrs Damaschke are placed in not being legally represented, they have not put before me a single piece of evidence which would cause me to doubt that in this case all required procedures have been followed by the Official Trustee and the Trustees. No ground is made out for review of the decision of the Official Trustee to apply for the appointment of trustees for sale. No ground is made out for an injunction to restrain the Trustees from selling the Property.